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Incentives for early signing of union-management agreements.

Process and Attitudes

The process of Collective Bargaining between employers and the worker's unions, for improvement in the terms and conditions of employees, is a serious activity within industrial and commercial establishments which is generally engaged in biennially. In return for improvement in the service conditions, employers garner industrial peace for the duration of agreements with the workers.

When negotiations on union's Charter of Demands are taking place, the atmosphere within the company/organisation is usually charged with expectations. Workers generally expect to achieve maximum benefit for themselves from the final deal struck with the company, while management seeks to come to closure so that the main activity of the enterprise is conducted without interruption. In this bargaining, the task of unions representing the workers becomes difficult as it is not realistic to meet the expectations of the employees group. While on the other hand the companies also face an uphill task when responding to the heightened expectations to concede more than the organisation's ability to pay. How do the parties negotiating in such a construct arrive at a settlement which satisfies the needs of both constituencies? The grace with which the final settlement is reached depends to a large extent on the experience and skills of the persons on each team and the 'goodwill' they bring to the process when seeking to do the best for the side they represent.

As is in every sphere of activity in Pakistan, the success or failure of a process is dependent upon the motives, egos and personality types of the people managing it. The collective bargaining process, to be successful, needs to be always a constructive process. It, at most times, becomes a battle of wits. However, in its true spirit it really can be a soaring, creative experience for both sides to come to closure on a win/win agreement. Attitudes that are brought to the bargaining table really become the arbiter of the decision-making process. Employers on their part, can believe in healthy unionism or work towards crushing genuine unions and even sponsoring 'pocket unions'.

Statutory provisions on Collective Bargaining

The complexity of the bargaining process can be appreciated by knowing the various stages, as prescribed by law, involved in the objective of arriving at settlements. The submission of a Charter of Demands by the union, in legalese amounts to 'raising of an industrial dispute' under section 26 of the Industrial Relations Ordinance, 1969. The word 'dispute', initiates the whole process on a negative note thereby loading the proposition with an adversarial context, which appears to be counter productive in the collective bargaining process. However when an agreement is reached, it is said that "the parties have reached an amicable settlement".

As it stands, on receipt of union's Charter of Demands, management has to settle the dispute through bilateral negotiations within ten days or within such extended period as may be mutually agreed. If settlement is not reached, the union may serve a strike notice on management within 7 days after the expiry of 10 days (or agreed period) allowed for bilateral negotiations. The period of this notice is 14 days.

- Upon receipt of the strike notice, the conciliator of the labour department is required to call a meeting of the union and management as soon as possible to bring about a settlement. The conciliator is required to suggest modifications and concessions to facilitate a settlement, but is not empowered to impose a decision or formalize an award on the dispute. If no settlement is reached before the conciliator within the period of strike notice, the parties may extend this period and continue conciliation proceedings with mutual consent towards reaching a settlement.

- If the conciliation process fails, then the conciliator would try to persuade the parties to refer the dispute to an arbitrator. In case the parties agree, management and union would make a joint request in writing for reference of dispute to an arbitrator. It is understood by both parties that the award handed down by the arbitrator as a decision, is final and is not appealable. If no settlement is arrived at during conciliation and the parties do not agree to refer the dispute to arbitrator, the workmen are entitled to go on strike on expiry of the 14 days notice period. The Provincial Government is empowered to prohibit a strike, if it is satisfied that continuation of such strike is prejudicial to national interest or is likely to cause hardship to the community.

- The union may at any time, either before or after the commencement of a strike, make an application to the labour court for adjudication of the dispute. After hearing both parties, the labour court has to give its award within a period of 30 days. It is in effect a settlement which becomes binding for a period not exceeding two years - the traditional period of a Collective Bargaining Agreement. An appeal is possible against the award of the labour court to the labour appellate tribunal, whose decision is final and binding on the parties.

- Management is not permitted to alter the conditions of service or otherwise punish any worker during the pendency of an industrial dispute before a conciliator, arbitrator or labour court except with their specific previous permission.

The ideal and most beneficial situation, both for employer and the union, is reaching a settlement amongst themselves without invoking the help of a third party. The conciliation proceedings by a conciliator, engagement of an arbitrator or taking the dispute to labour court, all have their own drawbacks. Majority of the conciliators try to broker a peace. If employers are seen to be reasonable, the conciliator sees his role as being able to persuade the unions to reach a settlement. If employers appear to 'speak' of merit to the conciliators, they might turn around and feel for the underdog and become difficult with the employers. Since the arbitrator's award is not appealable, it is generally not beneficial for management to agree to arbitration. The award of the labour court would depend upon how well the parties to the dispute present or defend their respective cases.

Incentive for Early Signing of agreement

It is in the interest of both the employer and the union to conclude the negotiation process punctually and with despatch. Inordinate delays in reaching a settlement may create unrest amongst the workforce leading to loss of production. It is interesting to note that some of the most protracted and bitter union-management negotiations have resulted in companies which were considered good paymasters. Therefore good pay alone is not an incentive for early settlement. Hence some of the enlightened and progressive employers in order to incentivize the bargaining process, have initiated an "early signing bonus" to the workers, if their union reaches a settlement with management by a certain date, which is usually challenging but achievable.

The incentive is awarded as being over and above the benefits given as part of the settlement (The current practice is a one time cash payment ranging from Rs. 500/- to Rs. 1500/-). The incentive framework allows sufficient time to the union to discuss its demands with management substantively, but at the same time acts as a deterrent to prolonging these deliberations unjustifiably. By adopting this system, managements have had success with corresponding benefits to unions. There are merits with hardly any demerits in the applications of the 'early signing incentive'.

It may be argued that fixing a target date for concluding a settlement, causes undue pressures on the unions. Conversely, negotiating constantly under pressure for prolonged periods, can be argued, is taxing for unions. It can also be said that offering an incentive for early signing of a settlement, is a negation of the principle of negotiating without any constraint and in a free environment. On the other hand, it can be rebutted that it provides an opportunity for the unions to closely focus on the issues, be realistic, have a sound strategy for discussions, and thoroughly tackle with management the key issues affecting the majority of their workforce, instead of trying to achieve the demands of individuals or a small group of workers. In other words, the unions have to prioritize their demands. Minor or less important issues can be sorted out through other avenues available under the labour laws for their resolution.

Sometimes a criticism is heard that the "Early Signing Incentive" gives an undue advantage to the employer in the form of a leverage. But it should be appreciated that there is no compulsion, and it is upto the unions to take advantage of the company's offer of an incentive or not! Some would argue that monetarily the company, in the event of an early settlement, loses because it has to start paying earlier than if the settlement was delayed. However, the company may be quite happy to settle early to achieve industrial peace and harmony so that it can go about its business of production having settled in good faith.

The one disadvantage, which I find with early signing incentive is that the unions which miss the stipulated date for any reason whatsoever, lose popularity amongst their electorates and may consequently be in a greater danger of being defeated in the next union elections. However, considering all aspects of the issue, I believe that offering an early signing incentive keeps the bargaining process on track and on the straight and narrow. It allows for a more focused exercise without getting unduly bogged down with peripheral matters and creates a psychology of coming to closure within a deadline to enjoy a benefit without a penalty. It works towards a win/win agreement.

Parvez Rahim, graduated from the University Law College, Lahore in 1969. Engaged in private legal practice in the Labour Courts in Lahore till January 1972. Parvez then joined a state enterprise, Lahore Engineering and Foundry Ltd. (formerly Ittefaq Foundries) in the field of Industrial Relations. In June 1977, he was appointed as the Industrial Relations Officer by Exxon Chemical Pakistan Limited. Having served in Exxon for six years, Mr. Rahim joined ICI Pakistan Ltd. in early 1983. Before his transfer to the company's Head Office at Karachi in 1988 as Corporate Industrial Relations Manager, Parvez was the Personnel and Administrative Services Manager in ICI's Polyester Fibre Plant at Sheikhupura. He is a much published writer of letters and articles on the labour legislation and Industrial Relations in the country's leading English publications.
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Author:Rahim, Parvez
Publication:Economic Review
Date:May 1, 1993
Words:1739
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